Preferred Bank (NASDAQ: PFBC) and OFG Bancorp (NYSE:OFG) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, analyst recommendations and profitabiliy.

Dividends

Preferred Bank pays an annual dividend of $0.80 per share and has a dividend yield of 1.4%. OFG Bancorp pays an annual dividend of $0.24 per share and has a dividend yield of 2.3%. Preferred Bank pays out 29.4% of its earnings in the form of a dividend. OFG Bancorp pays out 23.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. OFG Bancorp has raised its dividend for 3 consecutive years. OFG Bancorp is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations for Preferred Bank and OFG Bancorp, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Preferred Bank 0 1 1 1 3.00
OFG Bancorp 0 1 0 0 2.00

Preferred Bank currently has a consensus price target of $40.00, indicating a potential downside of 27.68%. OFG Bancorp has a consensus price target of $14.00, indicating a potential upside of 36.59%. Given OFG Bancorp’s higher probable upside, analysts clearly believe OFG Bancorp is more favorable than Preferred Bank.

Insider & Institutional Ownership

75.7% of Preferred Bank shares are owned by institutional investors. Comparatively, 100.0% of OFG Bancorp shares are owned by institutional investors. 2.6% of OFG Bancorp shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Preferred Bank and OFG Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Preferred Bank 28.31% 13.25% 1.22%
OFG Bancorp 14.19% 8.05% 0.92%

Risk and Volatility

Preferred Bank has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500. Comparatively, OFG Bancorp has a beta of 1.48, indicating that its share price is 48% more volatile than the S&P 500.

Earnings and Valuation

This table compares Preferred Bank and OFG Bancorp’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Preferred Bank $105.65 million 7.50 $38.98 million $2.72 20.33
OFG Bancorp $301.12 million 1.50 $45.70 million $1.04 9.86

OFG Bancorp has higher revenue and earnings than Preferred Bank. OFG Bancorp is trading at a lower price-to-earnings ratio than Preferred Bank, indicating that it is currently the more affordable of the two stocks.

About Preferred Bank

Preferred Bank is a commercial bank. The Bank provides deposit services, as well as real estate finance, commercial loans and trade finance to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals and high net worth individuals. The Bank offers various services, such as personal banking, business banking and treasury management. The Bank’s loan portfolio includes real estate mortgage loans, real estate construction loans, commercial loans and trade finance. Its real estate mortgage portfolio consists of real estate mini-perm loans, as well as purchased residential mortgages. The Bank offers a range of commercial loan products, including lines of credit for working capital, term loans for capital expenditures and commercial and stand-by letters of credit. Through its branch network, the Bank provides a range of financial services to individuals and companies located primarily in Southern California.

About OFG Bancorp

OFG Bancorp is a financial holding company. The Company is engaged in providing banking and financial services through its subsidiaries. The Company operates through three segments: Banking, Wealth Management and Treasury. The Company provides banking and financial services to its clients through a range of banking and financial solutions, including commercial, consumer, auto, and mortgage lending; checking and savings accounts; financial planning, insurance, financial service, and investment brokerage, and corporate and individual trust and retirement services. The Company provides these services through various subsidiaries, including a commercial bank, Oriental Bank; a securities broker-dealer, Oriental Financial Services Corp. (Oriental Financial Services); an insurance agency, Oriental Insurance, LLC (Oriental Insurance), and a retirement plan administrator, Oriental Pension Consultants, Inc. (OPC).

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